Some fairly significant changes are in store for the life insurance industry in the coming year. As 2015 approaches, you should be aware of the highlights as well as the pitfalls to avoid.
1. Policies Not Requiring Medical Exams
It’s no secret that some people are reluctant to take a medical exam. Many have difficulty working it into their schedules, some have a fear of needles, and others simply don’t want to go through the hassle. The great news is that “no medical exam” policies have proven to be an extremely successful product for insurance companies. Consumers have overwhelmingly opted for no medical exam options when given the choice, even when the policies are more expensive than traditional medical exam options. Five years ago, we had one or two options to offer clients in the no-medical-exam product category. In 2015, we have 10+ companies offering these simplified issue policies.
One of the downfalls of these simplified issue life insurance policies is the maximum benefit amounts are often under $400,000, forcing some clients to get multiple no-exam life insurance policies from different carriers. The great news is that we have seen the first company offering up to $1 million in coverage for a no-medical-exam policy this year.
Another new and growing trend to consider is the quick and instant issue no-exam life insurance options. This past year, we have seen several new companies enter this market. The applications are completely digital and underwriting decisions are offered within 24 hours. However, be aware that for these products, the insurance company will pull your Motor Vehicle Report, Medical Insurance Bureau, and Pharmacy Report. The Pharmacy Report will show all medications prescribed over the past five years. For those who are looking for the ultimate convenience, instant issue policies are a great option.
Cautionary note: While no-medical-exam policies can offer quick approvals, they can also offer quick declines, which are stored in the Medical Information Bureau (MIB) database, a service that gives all of the major insurance companies access to shared data. The MIB services “alert” underwriters to errors, omissions or misrepresentations made on insurance applications in an effort to mitigate their risk exposure and, in doing so, allow them to pass cost-savings to consumers. A “declined” status will tarnish an applicant’s record and can make it difficult to secure insurance from another company.
2. Competition and Technology
Competition among insurance companies has been increasing every year. According to a 2013 study, 80% of consumers will research online before purchasing a life insurance policy. With so many websites offering price comparison engines, listing all the available life insurance companies in order by premium cost, carriers are now competing head to head on cost. This is especially true in the term life insurance market where there are fewer moving parts to the policies.
For those with older policies, you should know that since the mid-1990s, policy rates are lower by up to 70%.
Direct competition is only one factor in this trend. Other factors include lower administrative costs (due to new technology) and the fact that people are simply living longer. In the term life insurance market, people living longer means profits for the insurance companies. Life insurance claims rates are decreasing for insurance carriers which means lower rates to consumers.
If you have an older policy, 2015 is a great year to re-examine whether there are significant cost savings on the table, especially if you are in good health.
Cautionary note: It is important to note when searching online for life insurance rates, most often the Preferred Plus health-class is displayed. Not everyone gets these low rates, so depending on your unique health situation and history, the company with the lowest displayed rate may not be the best option.
3. New Benefits & Riders
New hybrid life insurance policies offering living benefits riders have seen double digit growth over the past few years. These new policies offer unique riders that allow the insured to use the death benefit while they are still living. We have already seen the accelerated death benefit rider that offers access to a policy’s death benefit when the insured is terminally ill. Now, we have options to add Chronic Care and Critical Illness riders to policies that aim to aid in long term care and medical expenses from sudden illnesses.
The Chronic Illness rider allows you to use the policy’s death benefit if you are unable to perform two of the six daily living requirements of bathing, continence, dressing, eating, toileting, and transferring. This is very similar to a Long Term Care Policy. The Critical Illness rider also allows the insured to use the death benefit of their policy in the case of critical health conditions such as cancer, heart attack, stroke, a major organ transplant, end-stage renal failure, ALS, blindness, or paralysis of two or more limbs.
These are just two samples of the types of riders life insurance companies are adding to these new hybrid policies. And with the growing popularity of these policies, we can expect to see more. This is a great way to secure long term care benefits without having to purchase a separate policy. Additionally, you might appreciate the option to cash in on the death benefit while you are still living.
Cautionary note: Living benefit/hybrid life policies are still new. Make sure to examine the differences between carriers. States regulators are still examining the fine print of these policies so expect these products to continue to evolve.
4. Painless Policy Procurement
2015 aims to be a great year for lessening the piles of paperwork required for policies. Traditional paper applications are still available, though insurance carriers are finally moving towards more digital options. Many of the top carriers are offering drop-ticket type applications where the application is primarily entered online, and then completed by a paramedical examiner.
No-medical-exam policies are even easier with complete online application options. This is huge news for the once-antiquated insurance industry, and means faster policy procurement. 2015 will see large decreases in total underwriting times for those who take advantage of these new technologies.
Cautionary note: With the utilization of technology comes more security issues. Make sure your computer is properly protected with anti-virus software, and that you are connecting to the Internet on secure networks.
5. No Need to Meet Face-to-Face
According to a recent LIMRA report, 50 percent of consumers preferred buying life insurance without a face-to-face meeting. In the past, agents were required to witness client signatures and meet the insured in person. While many products and companies still require this, some insurance companies are now allowing for applications to be taken over the phone and signed for with digital and voice signatures. This is a massive time saver for clients and agents alike, making it now easier than ever to schedule the time to take an application. In 2015, we will see more insurance sales taking place over the phone, especially in the case of simple products like term life insurance.
Cautionary note: Just because a policy is taken over the phone without a face-to-face meeting does not make the application less official. An agent is still expected to fully qualify clients before submitting business to avoid unnecessary declinations or mis-ratings. Also note that the agent is responsible for truthfully notifying the carrier that the application was taken without meeting the client in person.
Life insurance is just one part of financial planning, but if you’ve been reluctant to explore life insurance due to the perceived drawn-out process, these changes may offer you compelling reasons to reconsider. Most of the changes are aimed at making the purchase of life insurance a less cumbersome process, which, in turn, frees up more time for you to focus on those for whom the insurance was purchased in the first place.